Tesla Bulls Largely Shrug Off Q4 Deliveries Miss: 'Strong Secular Growth Remains For Years To Come'

Tesla Inc TSLA shares were down sharply in premarket trading on Tuesday after the electric vehicle maker reported fourth-quarter deliveries missed analysts’ tempered expectations.

The Tesla Analysts: Wedbush analyst Daniel Ives maintained an Overweight rating and $175 price target on Tesla shares.

CANACCORD Genuity analyst George Gianarikas kept a Buy rating and a $275 price target.

The Tesla Thesis:

Tesla Is Held To Higher Standard, Says Wedbush: Tesla’s fourth-quarter deliveries and production numbers missed Street expectations and were nothing to write home about, Wedbush analyst Ives said. As opposed to Street expectations of 418,000 cars, Tesla sold 405,000, comprising 388,000 Model 3/Y cars and 17,000 Model X/S vehicles, he noted.

The annual growth of 40% is a strong number in a soft macro but missed the annual guidance of 50% and this remains the worry, heading into a very cloudy 2023, he added.

“Tesla is held to a higher standard and a miss is a miss and the bulls are not popping champagne on these numbers with now the big question around the 2023 demand/delivery picture,” Ives said.

The Street was now modeling sales growth of 35%-40% for 2023 and therefore Tesla needed to guide conservatively, the analyst said. As demand tempers, the company should further adjust and cut prices, especially in China, he added.

“The Cinderella ride is over for Tesla,” the analyst said, adding Musk now needed to navigate the company through this “Category 5 dark macro storm” instead of focusing on his new "golden child Twitter."

The social media platform, according to the analyst, remains a distraction and overhang for Tesla stock.

See Also: How to Invest In Tesla Stock

Focus Now Turns to Earnings Call, Says CANACCORD: With deliveries coming in better than worst-case fears, the focus now shifted to the fourth-quarter earnings call to assess the management strategy during the current period of cyclical demand softness, CANACCORD analyst Gianarikas said.

The analyst pointed to Musk’s recent Twitter Space comments that suggested he now prefers unit growth over margins. The firm remains convinced the current demand issues reflected cyclical pressures and that strong secular growth remains for years to come, he added.

“Despite a dodgy economic environment, we see several green shoots over the next year that should help fortify fundamentals including China reopening, IRA-related tax benefits, Cybertruck, and Energy Storage,” the analyst said.

Munster’s 3 Takeaways: Loup Fund’s Gene Munster saw the fourth-quarter production growth of 44% exceeding the 40% expectations as a win for Tesla. Tesla would likely outpace the auto industry by a factor of three times, he said.

Tesla’s logistics problem seemed to be continuing, the venture capitalist said, pointing to production outpacing deliveries by more than 8% compared to just over 6% in the September quarter.

Munster also expected margins to come in light, although he was not sure of the magnitude by which the metric would fall short. The margin impact of the 7% discounting in December would be known when the company reports its earnings on Jan. 25, he added.

Tesla stock was falling 13.88% to $106.08, according to Benzinga Pro data.

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